So were your previous comments stating this was the most undervalued stock on the asx just a ploy for you to sell?Is this a joke?
Prior to the capital raising, our opinion was clearly favourable towards this company.
That all changed with the capital raising to mates -- and not including existing shareholders.
We admit, we didn't look at note 20 of the annual report before the cap raising - that was a big, big mistake.
We were lazy.
But, tbh, we shouldn't have had to in the scheme of things. Look back to the 'Acquisition of SaaS platform Art of Mentoring'. The company said, "
Potential earn out: If AoM achieves certain revenue targets within the 24 months following the completion date, there will be further cash and scrip based consideration payable to the vendors of AoM across up to two additional tranches."
Limited detail.
Like
@Mike77 said, there's '
just general lack of transparency with shareholders".
It started with not saying the interest rate for the loan.
Fair enough.
But not actually detailing the
multiple $1.2M payments (phase 2 & 3) for AoM when the deal was inked is shocking.
It makes us think, did Prashant Chandra have a disagreement with the board about the financials? He was a finance guy and liked to keep things tight. Nevertheless, he did stay on for another six months for the transition period. Saying this, we found it strange that when Brendan Kavenagh took over the CEO role, he didn't communicate with the market (i.e. not webinar, no letter to shareholders, no nothing...).
At the end of the day, we have turned negative towards this company for a reason (see our the financial analysis above). Companies that tend to take on debt, tend to go down hill quickly (see our above analysis for more insight).
So why do we still own any stock?
At the end of the day, the board and management own 35.8% of the shares on issue and that means something to us:
- Michael Norster owns 137M shares (and he was the major driving force in forming a number of successful start-up Australian businesses. He founded the Australian Energy group of companies that traded under the name Powerdirect in 1997.)
- Nicholas Smedley owns 68.8M shares (Mr Smedley is an experienced investment banker and M&A adviser, with 14 years’ experience at
UBS and KPMG.).
Michael Norster will be instrumental for AD1's utilities business and getting it off the ground. Nicholas Smedley will be instrumental for any other M&A.
That said, we're concerned with the balance sheet position and the upcoming quarterly will be important. If they draw down on more debt and the negative free cash flow position remains, it won't look good for shareholders.
We still like the business (AoM etc) but are nervous about the financials now. But considering management own a lot of stock, we're still hanging around to see what happens.
There's been almost no talk from the utilities side of the business (what's happening with LPE, for example?)
The bottom line: Unfortunately, while operating cash flow is increasing so our the overheads (operating/investing cash outflows) and now the company has tapped its debt facility which puts it in an unfavourable position. AD1's net cash position is ~$1.5M now (~1M cash for Sept 30+ 2M raising - 1.53M debt), with $1.2M payment due to AoM soon (tranche 2). So they have a $300k net cash position, really. They burnt $1M operating cash last quarter and we wouldn't be surprised if they drew down the last $1M debt amount this quarter, unless receipts from customers increases rapidly and spend decreases as well.
Let's wait and see what happens...
We still have hope and are prepared to buy more stock, if anything changes for the best.
To your first million,
-Trading For Millions
